Certified Public Accountants & Advisors
ILLINOIS COMMUNITY COLLEGE
CHIEF FINANCIAL OFFICERS
SPRING 2012 CONFERENCE
GASB UPDATE
Presented by:
Frederick G. Lantz
Partner-in-Charge, Government Services
Sikich LLP
1415 Diehl Road
Naperville, IL 60563
(630) 566-8557
flantz@sikich.com
Certified Public Accountants & Advisors
GASB UPDATE
• GASB Statements to be Implemented
– Statement No. 62 through Statement No. 66
• Statement Nos. 54 – 61 covered last year
• GASB Due Process Documents
– Exposure drafts
– Discussion memorandums
– Invitations to comment (ITC)
©2012 Sikich LLP. All Rights Reserved.
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Certified Public Accountants & Advisors
GASB STATEMENT NO. 62
Codification of Accounting and Financial Reporting Guidance
Contained in Pre-November 30, 1989 FASB and AICPA
Pronouncements
• Issued December 2010, effective for fiscal years ending
December 31, 2012 and thereafter
– Incorporates pronouncements issued before November 30,
1989 by the following that do not contradict with GASB
Pronouncements
• FASB Statements and Interpretations (SFAS 106)
• Accounting Principle Board opinions (APB)
• AICPA Accounting Research Bulletins
– Supersedes GASB S-20
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Certified Public Accountants & Advisors
GASB STATEMENT NO. 62
Codification of Accounting and Financial Reporting Guidance
Contained in Pre-November 30, 1989 FASB and AICPA
Pronouncements
• Capitalized interest
– Proprietary funds
• Revenue recognition when right of return exists
– Proprietary funds
• Defines classifications for a classified statement of
position (balance sheet)
• Over 500 paragraphs
• Due to issuance of FASB Codification
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Certified Public Accountants & Advisors
GASB STATEMENT NO. 63
Financial Reporting of Deferred Outflows of Resources, Deferred
Inflows of Resources, and Net Position
• Issued June 2011, effective for fiscal years ending
December 31, 2012 and thereafter
• GASB Concepts Statement No. 4, Elements of
Financial Statements
– Assets -resources with present service capacity that the
government presently controls (BS)
– Liabilities-present obligations to sacrifice resources that the
government has little or no discretion to avoid (BS)
– Outflow of resources is a consumption of net assets by the
government that is applicable to the reporting period (IS)
– Inflow of resources is an acquisition of net assets by the
government that is applicable to the reporting period (IS)
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Certified Public Accountants & Advisors
GASB STATEMENT NO. 63
Financial Reporting of Deferred Outflows of Resources, Deferred
Inflows of Resources, and Net Position
• A deferred outflow of resources is a consumption of net
assets by the government that is applicable to a future
reporting period (BS)
• A deferred inflow of resources is an acquisition of net
assets by the government that is applicable to a future
reporting period (BS)
• Net position is the residual of all other elements
presented in a statement of financial position (BS/IS)
©2012 Sikich LLP. All Rights Reserved.
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Certified Public Accountants & Advisors
GASB STATEMENT NO. 63
Financial Reporting of Deferred Outflows of Resources, Deferred
Inflows of Resources, and Net Position
• Reporting
– Deferred outflows
• After assets
– No subtotal of assets and deferred outflows required (?)
– Deferred Inflows
• After liabilities
– No subtotal of liabilities and deferred inflows required (?)
– Net Position
• A+DO-L-DI=NP
• Replaces Net Assets/Fund Balances
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Certified Public Accountants & Advisors
GASB STATEMENT NO. 63
Financial Reporting of Deferred Outflows of Resources, Deferred
Inflows of Resources, and Net Position
• What to report in the categories?
• Addressed by GASB Statement No. 65, Items
Previously Reported as Assets and Liabilities
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Certified Public Accountants & Advisors
GASB STATEMENT NO. 64
DERIVATIVE INSTRUMENTS: APPLICATION OF HEDGE
ACCOUNTING TERMINATION PROVISIONS
• GASB S-53, Accounting and Financial Reporting for
Derivative Instruments
– Issued in June 2011
– Effective for fiscal years ending June 30, 2012 and thereafter
– Continuation of effective hedge after replacement of a swap
counterparty
– Specifies criteria to be met to continue to apply hedge
accounting
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Certified Public Accountants & Advisors
GASB STATEMENT NO. 65
ITEMS PREVIOUSLY REPORTED AS ASSETS AND
LIABILITIES
• Issued in March 2012
– Effective for fiscal years ending December 31, 2013 and
thereafter
– GASB Concepts Statement No. 4 limits use of terms “deferred
outflows” and “deferred inflows” of financial resources to
those instances specifically identified in GASB
pronouncements
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Certified Public Accountants & Advisors
GASB STATEMENT NO. 65
ITEMS PREVIOUSLY REPORTED AS ASSETS AND
LIABILITIES
• Specific guidance
– Accounting gain or loss on refunding of debt
• Deferred inflow or deferred outflow
• Amortize into interest expense
– Nonexchange transactions – Accrual basis
• Most deferred revenue from nonexchange transactions becomes a
deferred inflow of resources
– Imposed nonexchange transactions (e.g., property taxes)
– Government-mandated nonexchange transactions and voluntary
nonexchange transactions (e.g., grants)
– Debt issuance costs – expense in period incurred
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Certified Public Accountants & Advisors
GASB STATEMENT NO. 65
ITEMS PREVIOUSLY REPORTED AS ASSETS AND
LIABILITIES
• Specific guidance
– Regulated operations
– Governmental funds – modified accrual basis
• All deferred revenue in governmental funds becomes deferred
inflow of resources
– Major fund calculation
• Combine assets with deferred outflows
• Combine liabilities with deferred inflows
– Use of the term “deferred” only allowed in this context
– Future pronouncements will expand use of terms (e.g., pension
project)
©2012 Sikich LLP. All Rights Reserved.
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Certified Public Accountants & Advisors
GASB STATEMENT NO. 66
Technical Corrections, 2012
• Issued March 2012
– Conflict between GASB S-10 and S-54
• GASB S-10 Insurance activities in general fund or special
revenue fund
• GASB S-54 definition of a governmental funds
– Tort fund meets the definition of a special revenue fund
– Solution follow GASB S-54
– Effective for fiscal years ending December 31, 2013 and
thereafter
©2012 Sikich LLP. All Rights Reserved.
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Certified Public Accountants & Advisors
GASB DUE PROCESS DOCUMENTS
• ED – Accounting and Financial Reporting for
Pensions, an amendment of GASB Statement No. 27
– Issued June 2011, comment deadline October 15, 2011
– Current pension accounting
• Accounting liability only if you don’t fund what the actuary
recommends
• IMRF – ARC-reduced ARC = liability
• Unfunded actuarial accrued liability
– Disclosed in notes and required supplementary information
©2012 Sikich LLP. All Rights Reserved.
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Certified Public Accountants & Advisors
GASB DUE PROCESS DOCUMENTS
• ED – Accounting and Financial Reporting for
Pensions, an amendment of GASB Statement No. 27
– Problem
• Budget friendly, modified accrual basis
• Accrual basis, liability when earned by employee
• Lack of comparability due to choices of actuarial valuations and
assumptions
• Not recognizing spikes, cost of retro benefits or true cost of
pensions and any changes
– Solution
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Certified Public Accountants & Advisors
GASB DUE PROCESS DOCUMENTS
• ED – Accounting and Financial Reporting for
Pensions, an amendment of GASB Statement No. 27
– Proposed solution
• Net pension liability
– Difference between obligation for pensions and assets of the pension
plan
• Record as a liability in all accrual basis financial statements
– Governmental activities
– Enterprise funds
• Deferred inflow or outflow of resources
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Certified Public Accountants & Advisors
GASB DUE PROCESS DOCUMENTS
• ED – Accounting and Financial Reporting for
Pensions, an amendment of GASB Statement No. 27
– Measuring the net pension liability
• Projected benefit payments
– Assumptions – Actuarial Standards of Practice
» Future salary increases
» COLAs
» Discount rate
• Funding ARC – investment rate
• Not funding ARC – blended rate
• Cost of funds (borrowing)
– Entry age normal actuarial cost method
» Level percentage of payroll
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Certified Public Accountants & Advisors
GASB DUE PROCESS DOCUMENTS
• ED – Accounting and Financial Reporting for
Pensions, an amendment of GASB Statement No. 27
– Timing of measurement
• Actuarial valuation done as of your year end
– Or 1 year and one day of your fiscal year end (recent compromise)
• Update AV no older than 24 months from your year end
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Certified Public Accountants & Advisors
GASB DUE PROCESS DOCUMENTS
• ED – Accounting and Financial Reporting for
Pensions, an amendment of GASB Statement No. 27
– Pension expense
• Separately report
– Normal cost
– Immediate recognition of
» Change in terms of pension benefits
» Investment earnings
» For retired employees
• Changes in assumptions
• Difference between assumptions and actual
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Certified Public Accountants & Advisors
GASB DUE PROCESS DOCUMENTS
• ED – Accounting and Financial Reporting for
Pensions, an amendment of GASB Statement No. 27
– Disclosures
• Greatly expanded
– Required supplementary information
• Greatly expanded – 10 years
– Actuary costs
• Greatly expanded
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Certified Public Accountants & Advisors
GASB DUE PROCESS DOCUMENTS
– Cost sharing plans
• Each employer reports their “share” of the
overall plan’s net pension liability
– Special funding situations
• TRS, SURS
– Not so “special” anymore
• Report each “employers share”
– Measured by including “special funding”
– Status
• Final statement expected in June 2012
©2012 Sikich LLP. All Rights Reserved.
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Certified Public Accountants & Advisors
GASB DUE PROCESS DOCUMENTS
• PV – Recognition of Elements of Financial Statements
and Measurement Approaches
– Issued June 2011, comment deadline September 2011
• Result will be concepts statement
– Measurement focus
• What items to report in financial statements
– Basis of accounting
• When we recognize items in a financial statement
©2012 Sikich LLP. All Rights Reserved.
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Certified Public Accountants & Advisors
GASB DUE PROCESS DOCUMENTS
• PV – Recognition of Elements of Financial Statements
and Measurement Approaches
– Replaces current financial resources measurement focus
• Near term financial resources measurement focus
– Fair value reporting?????
– Status
• Proposed exposure draft in October 2012
• Final concepts statement in June 2013
– Used in developing future pronouncements
©2012 Sikich LLP. All Rights Reserved.
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Certified Public Accountants & Advisors
GASB DUE PROCESS DOCUMENTS
• PV – Economic Condition Reporting: Financial
Projections
– Issued November 2011
– Comment deadline March 16, 2012
• Result will be a future statement (after ED)
– 5 components of information needed to assess fiscal
sustainability
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Certified Public Accountants & Advisors
GASB DUE PROCESS DOCUMENTS
• PV – Economic Condition Reporting: Financial
Projections
– Projections of the total cash inflows and major individual cash
inflows, in dollars and as a percentage of total cash inflows, with
explanations of the known causes of fluctuations in cash inflows
– Projections of the total cash outflows and major individual cash
outflows, in dollars and as a percentage of total cash outflows,
with explanations of the known causes of fluctuations in cash
outflows
– Projections of the total financial obligations and major individual
financial obligations, including bonds, pensions, other
postemployment benefits, and long-term contracts, with
explanations of the known causes of fluctuations in financial
obligations
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Certified Public Accountants & Advisors
GASB DUE PROCESS DOCUMENTS
• PV – Economic Condition Reporting: Financial
Projections
– Projections of annual debt service payments (principal and
interest)
– Narrative discussion of the major intergovernmental service
interdependencies that exist and the nature of those service
interdependencies
– Projections made for a minimum of 5 years
– Cash basis of accounting
©2012 Sikich LLP. All Rights Reserved.
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Certified Public Accountants & Advisors
GASB DUE PROCESS DOCUMENTS
• PV – Economic Condition Reporting: Financial
Projections
– Major opposition
• GFOA
• AICPA
– Status
• ED spring/summer 2013
• Final statement in October 2013
©2012 Sikich LLP. All Rights Reserved.
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Certified Public Accountants & Advisors
QUESTIONS?
Presented by:
Frederick G. Lantz
Partner-in-Charge, Government Services
Sikich LLP
1415 Diehl Road
Naperville, IL 60563
(630) 566-8557
flantz@sikich.com
©2012 Sikich LLP. All Rights Reserved.
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